Practice of Real Estate, Ethical Conduct, and Risk Management
Competence and scope
Licensees coordinate transactions but must not practice law: do not draft deeds, easements, or legal clauses, and do not give legal or tax advice. When a question requires an attorney, lender, engineer, or accountant, refer and document the referral.
Misrepresentation
Know the three levels: fraud (intentional), negligent misrepresentation (careless statement treated as fact), and puffery (opinion, not actionable). Never state condition facts outside your knowledge; recommend inspections instead.
Money and referrals
RESPA prohibits kickbacks and unearned fees for settlement services. Referral fees may be paid only to a licensed brokerage, not to unlicensed vendors. Trust funds must be reconciled and records retained.
Risk management practices
Use written agreements and disclosures, confirm instructions in writing, document showings and advice, protect confidential information in multiple-offer situations, present all offers promptly, avoid unauthorized practice, and carry errors and omissions coverage. Procuring cause governs commission disputes; written buyer agreements reduce those conflicts.
Worked example: A buyer asks the agent to 'just write a quick easement across the neighbor's land.' The agent declines, explains that document drafting is the practice of law, and refers the buyer to a Maine attorney while continuing to coordinate the transaction.
Trap: reassuring a buyer that 'the roof looks fine' and creating a negligent misrepresentation claim.